For the past 15 years or so, my “mushroom theory” was an amazing tool (no…
Denver inventory jumps 81%, are declining prices next
Spring has come in with a roar in the Denver metropolitan area as inventory from February to March jumped 81%. What has caused the huge jump in inventory? What does the change in inventory mean for prices? How will Denver real estate perform compared to the National average?
What was in the data regarding Denver real estate inventory?
Metro Denver recorded an 81% jump in the number of residential properties available for sale last month, according to a monthly update from the Denver Metro Association of Realtors.
That inventory surge, which outstrips the 6.4% gain averaged between February and March, was driven in part by a 43.6% increase in new listings last month.
At the same time the median home price hit a record high of $660,000 while the average sales price jumped to $800,000 also the highest on record
Important to keep the data in context
The huge percentage gain, however, comes off an extremely low number of listings available for sale in February. Even with the big increase, there were only 2,221 active condo and single-family homes for sale in metro Denver at the end of March, a fraction of the 13,917 averaged between 1985 and 2021.
“Those additional 995 new listings on the market at the end of the month will slightly aid the balance of supply and demand,” said Andrew Abrams, chairman of the DMAR Market Trends Committee, in comments accompanying the report.
What is driving the surge in inventory?
There are two primary factors driving the recent uptick in inventory.
- Consumer sentiment change: There is a fear that we are at the top of the market and sellers want to take advantage of the market before it is too late
- Rising rates: As rates rise, properties become relatively more expensive therefore limiting demand. Sellers want to take advantage of the market before rates rise even further.
How will prices in Denver be impacted from rising inventory?
A separate home price index from CoreLogic puts the annual pace of single-family home price appreciation in metro Denver in February at 20.4%, on par with a 20% gain measured nationally. Remember, this is before the recent increase in inventory and huge jump in interest rates.
How does this compare to the rest of the nation?
CoreLogic is forecasting only a 3.9% rate of home price appreciation going forward over the next 12 months for metro Denver, which is below the 5% gain expected nationally.
The last couple years of 20% plus appreciation has come to an end. The recent increase in inventory over the past month are an indicator of more to come. As inventory increases, prices will no doubt moderate to a more reasonable pace. Although the sky is not falling, as rates increase even further Denver will likely underperform many markets due to the higher price points and in turn higher payments from increased rates.
- Demand easing as mortgage rates rise, boosting supply of homes for sale in metro Denver (denverpost.com)
- Realtor News | DMAR (dmarealtors.com)
- Regional and Statewide Statistics – Colorado Association of REALTORS (coloradorealtors.com)
- As Mortgage Rates Rise, Home Sellers Fear Time Is Running Out to Cash In – WSJ
- Rising mortgage rates cause more home sellers to lower asking prices (cnbc.com)
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Written by Glen Weinberg, Owner Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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